In terms of the entire history of the United States, the federal income tax is relatively new, having been introduced in 1913. Since then, rates have frequently increased with the top marginal rate now sitting at 37%. This increase unfortunately has had a negative impact on economic growth in this country. A decrease in income tax rate would greatly stimulate the economy. By putting more money, and therefore more purchasing power into the pockets of citizens, the result almost certainly would be a major boom in economic production.

This graph illustrates the point. These 30 first-world countries, defined as a Human Development Index of greater than .80 which is considered highly developed, demonstrates the negative economic effect of higher taxation. The graph clearly shows a negative correlation between federal income tax rates and GDP growth over the 10-year period between 2010 and 2019.

With more money in the pockets of citizens, they are able to purchase more goods and services, which is what drives the economy.

Throughout the COVID-19 pandemic, the US government has issued three sets of stimulus checks with the intent of stimulating the economy by putting more purchasing power into the pockets of citizens, and they have been quite successful. The pinch may not have been as acute if consumers already had that money in their IRAs, 401ks and credit union savings and mutual money market accounts. As of 2018, the average citizen of the United States paid $15,322 in income taxes alone. If we simply cut the income tax rate, it would greatly increase the purchasing power of all citizens, and thus greatly stimulate the economy and creating more jobs.

Some express concerns about the decrease in government revenue, however, the Social Security program would require far less funding because people would have more income to invest into more private savings options. Additionally, significantly less spending would be required for welfare as more job opportunities become available as a result of the increased economic activity.

People making $15,000 a year and struggling to get by currently pay $987.50, plus 12% of the amount they earn over $9,875, totaling more than $1,600 per year. All of this despite making an income that qualified for food stamps! Putting that money back in the pockets of the people will decrease their need for welfare and thus decrease government’s need to fund it.

Overall, eliminating the federal income tax would be a massive benefit to the citizens of the United States. It would greatly stimulate economic growth, decrease the need for welfare and social security, create jobs and generally create an extremely positive impact for the American people.